Indiegogo tries out 'crowdfunding insurance' for failed projects

Indiegogo is rolling out a test of a new service that will refund your money if a project fails to deliver within a certain time frame.

Michelle Starr Science editor
Michelle Starr is CNET's science editor, and she hopes to get you as enthralled with the wonders of the universe as she is. When she's not daydreaming about flying through space, she's daydreaming about bats.
Michelle Starr
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There's always a bit of a risk involved in crowdfunding. Running late is pretty normal -- a lot of things can take longer than anticipated -- but what about projects that fail, creators that implode, or those that are just out-and-outscams?

Some people seem to understand those risks; that what you're doing is not buying a product, but funding an idea. And, of course, some platforms seem more trustworthy than others. With lower barriers to entry, competitor Indiegogo has always seemed more on the risky side.

In response to this -- and perhaps in response to a survey on trustworthiness the website ran a month ago -- Indiegogo is conducting a trial run of a failsafe where it allows users to purchase optional crowdfunding insurance.

It works pretty much like you would think: you pay an additional price on top of your backing. If the project fails to deliver, you get the backing price refunded (although not the price of the insurance, obviously). It's being tested on the Olive stress monitor wristband currently, where Indiegogo has given a window of three months past the estimated delivery date before the user can claim their money back.

The company has confirmed that it is running the trial to TechCrunch, but did not elaborate further. "Indiegogo regularly develops and tests new features to meet the needs of both funders and campaign owners. This pilot test is currently limited to this individual campaign," Indiegogo said.

The feature, if fully implemented, could see user trust in the platform rise. On the other hand, it could see Indiegogo significantly out of pocket. There are quite a few products, such as the Healbe calorie monitor, which will not be able to work as promised, but received a lot of money; in the case of the Healbe, over $1 million. The Healbe is a double whammy, too -- it had an estimated delivery date of June 2014. Or the Smarty Ring a similar scenario, with an estimated delivery date of May 2014. Or the Robot Dragonfly that reached $1.14 million and is now over a year late.

It is also unclear whether the insurance will apply to "Forever Funding" campaigns -- successful campaigns that will be allowed to stay open to receive funding past their deadline.